What is CPTPP?

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First initiated by Brunei Darussalam, Chile, New Zealand, and Singapore, a trade coalition was created under the name of TPSEP (Trans-Pacific Strategic Economic Partnership Agreement) in 2005. Over the next few years, other countries started joining the agreements and in 2010, the Trans-Pacific Partnership, more commonly known as the TPP was established between eleven countries namely Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Later in 2016, Obama Administration proposed to join the free trade agreement as an effort to further breach into Asia by increasing American exports and supporting American jobs, while at the same time, boosting American competitiveness in the Asia-Pacific region. However, only a year later, President Donald Trump decided to withdraw the United States from the agreement and TPP was forced to shift into what we now know as CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) or the TPP-11. Consisting of the original eleven countries before the US joined in, the trade partnership represents 13.5% of the global GDP.

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CPTPP’s Renewed Agreement & Efforts Toward ESG

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CPTPP, in its policy and regulations, still refers mostly to the original agreement within the TPP. It maintains the highly ambitious trade rules and market access, however with updated procedures on entries and withdrawal, in retrospect of the prior event with the United States. With that said, 22 provisions from the TPP have also been suspended as it no longer aligns with the CPTPP.  In total, there are 30 chapters in the complete CPTPP agreements. It covers all aspects of trade regulations between the eleven countries including market access, government procurement, custom administrations, investment, intellectual property, SMEs, and many more. With the CPTPP’s commitment to pursue environmental, socially responsible, and well-governed (ESG) based investment and trades, two specific chapters are also dedicated in regards to labor and environmental matters.

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The CPTPP’s investment funds are accounted to reach at least $580 billion in total. With their dedication to further engage in ESG investing, this amount can further be distributed to support different ESG projects within the region and enhance the ESG awareness in the countries. Especially with the fact that most of the CPTPP’s members are still not countries with avid players in the ESG investment world.

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On its accord regarding environmental matters, the CPTPP mentioned its members’ goals to ‘promote high levels of environmental protection and effective enforcement of environmental law’ as well as ‘priorities and circumstances, the Parties recognize that enhanced cooperation to protect and conserve the environment and sustainably manage their natural resources. The chapter also emphasizes the importance to take measures and responsibilities in emission production and how it impacts the ozone layer. The following sub-chapter also mentioned topics regarding sea pollution, biodiversity, and fisheries, as well as promoting its members to shift into low emission energies and economies. In addition to highlighting the issues, the CPTPP agreement also provides clear guidelines on how each of its members should take action in response to the relevant matters.

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The labor chapter also discussed important topics such as the importance of labor rights and how to protect them. The development of labor qualities is also mentioned. For its Southeast Asian members, it becomes a great opportunity to increase their competitive advantages. Foreign investment will no longer be interested in the countries just because of their low labor cost, but instead because of the quality of their human capital, as well as their participation and significance in the world. By joining CPTPP, it will also enhance its bargaining power due to free trade with more powerful countries.

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Although CPTPP has yet to have a specific chapter designer for the governance matters of ESG, it is obvious that they are having the intention to implement ESG as part of their policies and business deals. By having powerful alliances putting emphasis on their ESG activities, it will also encourage other similar agreements such as EFTA, NAFTA, or EU to join the movement.

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